Rural poverty in India saw a significant decline over the past year, dropping below 5% for the first time. Increased rural spending reduced the poverty rate to 4.86% in 2023-24, down from 7.2% in the previous year and 25.7% in 2011-12, the report highlighted.
In contrast, urban poverty experienced a more modest decrease, falling to 4.09% in FY24 from 4.6% the previous year.
The report added, “It is possible that these numbers could undergo minor revisions once the 2021 census is completed and new Rural Urban population share is published. We believe urban poverty could decline even further . At an aggregate level, we believe poverty rates in India could now be in the range of 4%-4.5% with almost minimal existence of extreme poverty.”
The physical infrastructure led to urban mobility, which led to the reduction of the gap between rural and urban areas and diminishing rural income inequality.
The report added, “Around 30% of the Rural MPCE is explained by factors that are endogenous to the rural ecosystem. Such endogenous factors are mostly due to the initiatives the government has taken in terms of DBT transfers, building Rural infrastructures, augmenting farmer’s income, improving the rural livelihood significantly.”
MPCS, or Monthly Per-Capita Consumer Expenditure, serves as a key measure of a family’s economic standing.
The rural-urban consumption gap narrowed to 69.7% in 2023-24, down from 71.2% in the previous year and 83.9% a decade ago.
The report highlighted that while food items now account for a smaller share of spending, their changes still significantly influence overall consumption patterns. High inflation has contributed to reduced consumption across the board, with rural areas in low-income states feeling the brunt of this impact.
In contrast, middle-income states played a crucial role in maintaining consumption demand.
India’s inflation rate remained above 5% in November, prompting the Reserve Bank of India’s Monetary Policy Committee (MPC) to keep rates unchanged during its December meeting, marking the eleventh consecutive pause. The committee is scheduled to reconvene in February.
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